Last week, Actavis announced what its management team would look like following the completion of the Forest deal, which is expected to be some time towards the end of the year. The line-up contained some obvious choices and some surprises, with the overall impression being of a rather top-heavy team that knows an awful lot more about brands than about generics.
As expected, Paul Bisaro will be Chairman, relinquishing his current role of CEO. However, he is to be an Executive Chairman, with continued responsibility for a number of business areas. Reporting to him in the CEO slot is not, as we had expected, Siggi Olafsson, but Brent Saunders, the former CEO of Forest Labs. It was made clear from the start that Brent would get a Board seat and we had assumed that he would not also have an executive role, but he clearly wanted to remain in the driving seat and so it was Siggi who got shunted out of the passenger door and will now leave Actavis once the Forest deal closes. Under Brent, as COO, is Robert Stewart, who was formerly the head of operations at Actavis and beside him, also reporting to Brent, are VPs for North American Brands and North American Generics/International (this bit presumably includes brands outside the US and Canada). VP Brands is Bill Meury, who is the obvious choice given that he was previously Forest’s EVP Sales and Marketing, but the VP Generics/International is Actavis’s former legal council, David Buchen, which is definitely an unexpected move. Our presumption is that Siggi was offered this job – which fits his experience perfectly – but turned it down, since it would have been seen as a step down from his previous role. However, it’s still pretty odd to give it to someone who has no operational experience whatsoever. For the international subsidiaries, in particular, there is the prospect of three layers of management to get through before reaching someone who has actually run a generics business before, which is not very encouraging.
In our view, the currently envisaged structure is unlikely to last. To quote the Actavis press release, Paul Bisaro will ‘oversee the development of the Company’s brand, generic, branded generic and OTC business growth strategies, as well as the identification and execution of mergers and acquisitions, including geographic and business unit diversification strategies and initiatives. He will also continue to share in senior management team selection and retention, overall business integration initiatives [and] strategic planning for both organic and inorganic growth’. With an Exec Chairman responsible for all those functions above him and a COO below, it’s a bit hard to see how Brent Saunders is going to fill his day. Plus, since he is jointly responsible for a lot of these activities, there is plenty of scope for disagreement about strategic direction and the best way to drive growth. We therefore suspect that he won’t actually stick around that long and that the management chain will collapse back into something a bit more normal, with a non-Exec chairman and a CEO – or Paul Bisaro re-combining the two roles.
In the meantime, there is quite a bit of rationalisation to be getting on with, mainly in the US, since Forest has only a rather limited presence outside North America. Of course, Forest itself is still digesting Aptalis (and recently agreed to buy Furiex Pharma, a specialist GI development company) so these will also have to be fitted in to the final structure. It is already clear, though, that the main focus is going to be on the US (otherwise International would surely have had its own VP) and we suspect that it will also be mainly on brands, since it is critical for Actavis to demonstrate that the Forest deal makes sense, ie that sales of Forest’s key product, memantine, are not going to collapse with the onset of generic competition in 2015. Actavis now also has a substantial innovative R&D portfolio to keep an eye on, which will require more attention than its generics did, not to mention its ongoing biosimilar collaboration with Amgen. Indeed, it is going to face some of the same problems that big pharma companies have – competing demands for capital from within the various parts of the business. Operationally, we would also expect some management unhappiness within the international country teams and it will be interesting to see whether the departure of Siggi Olafsson results in any changes further down the line.
Overall, we believe that it will be quite challenging to create a coherent (and fully functional) business out of the pieces that Actavis now has to juggle with; all the more so since there is no evidence that the company is ready to stop making acquisitions just yet. This being so, it is perhaps understandable that Paul Bisaro wants to keep Brent Saunders engaged and to have a VP Generics who has extensive M&A experience. Nevertheless, sooner or later, the focus has to switch to driving the business forward rather than just cutting costs, at which point that empty passenger seat could prove to be more of a problem.